Title: GBPUSD eases from multi-day high, still well bid below mid-1.1400s amid softer USD
November 07,2022 07:40 AM ET
The GBP/USD attracts some buying after an early drop to the 1.1290 area on Monday and builds on the previous session's good bounce from a two-week low. This marks the second consecutive day of a positive move and lifts spot prices to the 1.1475 region, or a three-day high during the mid-European session.
The US dollar adds to the sharp losses suffered following Friday's non-farm payrolls (NFP) release and falls to a one-week low, which, in turn, is seen as a key factor driving the GBPUSD pair higher. Mixed results from Friday's NFP release fueled speculation that the Fed may slow the pace of its tightening policy. This, coupled with a generally positive tone in equity markets, continues to weigh on the safe-haven dollar.
That said, concerns about headwinds stemming from China's commitment to maintain its economically disruptive COVID policy could dampen optimism. In addition, markets continue to price in the possibility of a Fed rate hike of at least 50 basis points in December. This continues to support elevated US Treasury yields, which should act as a tailwind for the dollar and limit the GBPUSD pair's upside.
This, in turn, suggests that any subsequent move to the upside could still be seen as a selling opportunity and risks fading fairly quickly. No major market-moving economic data will be released on Monday. Therefore, US bond yields, along with overall market risk sentiment, will play a key role in influencing USD price dynamics and producing short-term trading opportunities around the GBPUSD pair.
From a technical standpoint, the pair formed a two-bar reversal when it pivoted and rallied before the weekend. Today's follow-through buying is confirming this bullish pattern and suggests that the pair may have more room to run, assuming the day ends on an equally strong note. Tougher resistance is around 1.1510, as indicated by the long-term downtrend trend line that has held for most of 2022, and cable will definitely have to break above this level to consolidate its advance and open up ground above.